Crude oil markets endured a sharp four-day selloff from June 22-26, driven by collapsing geopolitical risk premiums and mounting global supply. The steep decline wiped out nearly all the gains from mid-June’s heightened Middle East tensions, as traders recalibrated around fresh supply-side realities and emerging demand concerns.
Iran-Israel Ceasefire Removes Key Supply Risk
Oil’s abrupt decline was catalyzed by a ceasefire agreement between Israel and Iran, announced late Monday by U.S. President Donald Trump. Though Israel accused Iran of violating terms shortly after, the truce held. For traders, this effectively neutralized the immediate threat of disruption to Persian Gulf flows, particularly through the Strait of Hormuz, which handles around 20% of global oil traffic.
Iran’s oil exports—over 2 million barrels per day (bpd) from a 3.3 million bpd output base—were no longer seen at risk. The geopolitical premium that had built since Israel’s initial strike evaporated almost instantly. “The risk premium built up since the first Israeli strike… has entirely vanished,” noted Tamas Varga of PVM Oil Associates. Positioning shifted rapidly out of Middle East exposure, slamming crude prices.
OPEC and Non-OPEC Output Growth Floods the Market
Further pressure came from accelerating supply. OPEC is set to increase output by 411,000 bpd in June, a clear move away from earlier voluntary cuts. Rosneft CEO Igor Sechin added to the bearish tone by suggesting…
Crude oil markets endured a sharp four-day selloff from June 22-26, driven by collapsing geopolitical risk premiums and mounting global supply. The steep decline wiped out nearly all the gains from mid-June’s heightened Middle East tensions, as traders recalibrated around fresh supply-side realities and emerging demand concerns.
Iran-Israel Ceasefire Removes Key Supply Risk
Oil’s abrupt decline was catalyzed by a ceasefire agreement between Israel and Iran, announced late Monday by U.S. President Donald Trump. Though Israel accused Iran of violating terms shortly after, the truce held. For traders, this effectively neutralized the immediate threat of disruption to Persian Gulf flows, particularly through the Strait of Hormuz, which handles around 20% of global oil traffic.
Iran’s oil exports—over 2 million barrels per day (bpd) from a 3.3 million bpd output base—were no longer seen at risk. The geopolitical premium that had built since Israel’s initial strike evaporated almost instantly. “The risk premium built up since the first Israeli strike… has entirely vanished,” noted Tamas Varga of PVM Oil Associates. Positioning shifted rapidly out of Middle East exposure, slamming crude prices.
OPEC and Non-OPEC Output Growth Floods the Market
Further pressure came from accelerating supply. OPEC is set to increase output by 411,000 bpd in June, a clear move away from earlier voluntary cuts. Rosneft CEO Igor Sechin added to the bearish tone by suggesting OPEC+ could bring forward future production hikes by up to a year, adding more uncertainty to oil price projections.
Kazakhstan raised its 2025 output forecast at the Chevron-led Tengiz field to 35.7 million metric tons, up from 34.8 million. Meanwhile, ExxonMobil ramped up production in Guyana, reaching 667,000 bpd in May from 611,000 in April. These announcements pointed to broad-based production growth, reinforcing concerns of an oversupplied market.
U.S. Crude Inventory Draws Reveal Underlying Demand
Amid the bearish supply headlines, U.S. inventory data offered signs of firm demand. The American Petroleum Institute reported a 4.23 million-barrel draw for the week ending June 20, far exceeding the 0.8 million-barrel forecast. Official EIA figures confirmed an even steeper 5.84 million-barrel decline.
Gasoline inventories also fell by 2.1 million barrels despite expectations for a build, while gasoline supplied surged to its highest level since December 2021. The data confirmed a robust start to the delayed summer driving season and underscored resilient consumer demand—offering a critical counterbalance to the global oversupply narrative.
Consumer Confidence and Fed Policy Raise Demand Concerns
Still, economic indicators raised fresh demand concerns. U.S. consumer confidence fell sharply in June, with the Conference Board Index dropping to 93.0 from 98.4. The Expectations Index slipped to 69.0, well below the 80 threshold typically signaling a recession. Households expressed growing concern over job availability, posing risks to summer fuel consumption.
Fed Chair Jerome Powell’s testimony suggested potential rate cuts, with markets pricing in nearly 60 basis points of easing. While monetary policy accommodation usually supports commodities, the context—deteriorating economic sentiment—tempered its bullish impact.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend is up according to the weekly swing chart. But the current weekly closing price reversal top formation indicates momentum is trending lower.
The market is also trading on the weak side of a long-term pivot at $67.44 and the 52-week moving average at $66.01.
Due to the strong volatility the expected range next week is wide, but everything will be controlled by trader reaction to the long-term pivot and the 52-week moving average. Some traders are bracing back for a “snapback” rally after a steep plunge. Others are waiting for a resumption of the downtrend.
Weekly Technical Forecast
The direction of the Weekly Light Crude Oil Futures market the week ending July 4 is likely to be determined by trader reaction to $67.44 and $66.01.
Bullish Scenario
A sustained move over $67.44 will signal the presence of buyers. If this creates enough upside momentum, we could see a near-term rally into a minor pivot at $71.20. The major upside target is the resistance zone at $78.40 to $82.31.
Bearish Scenario
A sustained move under $66.01 will indicate the return of sellers. If it generates enough downside momentum, we could see a near-term correction into a minor pivot at $65.44, followed by a support zone at $53.31 to $51.98.
Market Outlook: Supply Abundance Meets Demand Concerns
The June 22-26 selloff reflected a decisive market repricing. With geopolitical risk premiums erased, OPEC+ output climbing, and structural global supply resilience growing, oil markets re-centered around fundamentals. Even with strong U.S. inventory draws, the balance of forces now leans bearish.
Outlook: Bearish. Fading geopolitical risks and rising global supply outweigh U.S. demand strength, placing further pressure on oil prices.
Technically, prices could become rangebound between $66.01 and $67.44. Or they could continue to weaken under $66.01 or strengthen over $67.44.
Last week’s failed breakout rally and the speed of the decline this week indicates the strong presence of strong sellers, putting the market in “sell the rally” mode.
